The paper surveys and appraises the recent theoretical research on informational cascades and herding behavior in capital markets. Standard models of informational cascades hardly apply to capital markets where all publicly available information is reflected in the price. The paper briefly describes the situations in which an informational cascade may take place also in the context of financial markets and shows how herding can help to explain bubbles and crashes.
Informational Cascades in Financial Economics: A Review
ROMANO, Maria Grazia
2009-01-01
Abstract
The paper surveys and appraises the recent theoretical research on informational cascades and herding behavior in capital markets. Standard models of informational cascades hardly apply to capital markets where all publicly available information is reflected in the price. The paper briefly describes the situations in which an informational cascade may take place also in the context of financial markets and shows how herding can help to explain bubbles and crashes.File in questo prodotto:
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